In Announcement 2010-9 the IRS proposes to require business taxpayers to disclose their “uncertain tax positions” on a new schedule to be attached to their federal tax returns.

Business taxpayers with total assets in excess of $10 million, who prepare GAAP based financial statements, would be affected by this proposed change.

The IRS is developing a schedule to be completed and attached to their income tax returns. It appears that the IRS is proposing to modify its “Policy of Restraint” with respect to tax accrual workpapers. The IRS is also evaluating whether to seek legislation to impose a penalty for failure to file the schedule or to make adequate disclosure.

The schedule will disclose:

A concise description of each uncertain tax position for which the taxpayer or a related entity has recorded a reserve in its financial statements and

The maximum amount of potential federal tax liability attributable to each uncertain tax position.

In addition to those positions for which a tax reserve must be established under FIN 48 or other accounting standards, uncertain tax positions will include any position related to the determination of any federal income tax liability for which a taxpayer or a related entity has not recorded a tax reserve because:

The taxpayer expects to litigate the position
The taxpayer has determined that the IRS has a general administrative practice not to examine the position

The schedule will require a concise description of each uncertain tax position in sufficient detail so that the IRS can determine the nature of the issue.

The schedule will require a taxpayer to specify for each uncertain tax position the entire amount of federal income tax that would be due if the position were disallowed in its entirety on audit. This amount is the maximum tax adjustment for the position reflecting all changes to items of income, gain, loss, deduction or credit if the position is not sustained.

Given the importance of these issues to both the Service and taxpayers, the

Service intends to publish the new schedule as quickly as possible and therefore invites the public to submit comments on the proposal described in this announcement by March 29, 2010.

About Thomas Brown CPA P.C.

Thomas Brown CPA P.C. is a consulting firm which provides cost effective outsourced FAS 109 solutions and consolidated return preparation.

We help our clients get through the difficult task of preparing quarterly and annual FAS 109 tax provisions and allow them to have a greater focus on quarterly and year end financial statement preparation.

IRS Announcement 2010-9